MAS Tightens Requirements for Tax Incentive Application of Family Office
Stricter requirements for family office-related tax incentives took effect in Singapore on 18 April, MAS (Monetary Authority of Singapore) announced.
The changes follow amendments to the requirements for family offices applying for tax incentive schemes pursuant to Sections 13O and 13U of Singapore's Income Tax Act.
Under the new requirements, MAS has introduced a minimum fund size requirement of SGD 10 million (USD 7.3 million) at the time of an s13O application, rising to SGD 20 million within two years, to be eligible for tax breaks. Previously, no minimum AUM was required.
In addition, family offices must now have a minimum of two investment professionals, with a one-year grace period for hiring the second professional. The family office must also have minimum local business spending of SGD 200,000, subject to new tiered criteria based on AUM.
For s13U family office structures, which can be under offshore jurisdictions, the existing minimum fund size of SGD 50 million at the point of application remains unchanged.
However, a new rule is introduced requiring at least one non-family member to be employed out of the three required investment professionals, and the minimum local business spending requirement has been raised from SGD 200,000 to SGD 500,000.
Both s13O and s13U funds must also make local investments with either at least 10 percent of their AUM, or SGD 10 million, whichever is lower.
Local investments include equities listed on Singapore-listed stocks, qualifying debt securities, funds distributed by Singapore-licensed fund managers, and private equity from Singapore-incorporated companies.
Singapore has more than 400 family offices. Those with existing s13O or s13U status, or those with applications already underway, are not affected.
While the new requirements are expected to slow the market's growth, they are also expected to attract larger and more wealthy families to set up in Singapore.
Source: Regulation Asia
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